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EU Report Considers Blockchain-Based Digital Identities, Tokenized National Currencies

The EU Blockchain Observatory and Forum has made a case for a blockchain-powered “self-sovereign” digital identity system to secure and share personal information.

In its latest report released on Dec. 7, the European Union Blockchain Observatory and Forum (EUBOF) made a case for a blockchain-based digital identity system and digital versions of national currencies.

The report was prepared by blockchain software technology firm ConsenSys AG on behalf of the EUBOF, and focuses on the analysis of what blockchain properties could be beneficial and advantageous for governments.

The EUBOF suggests that governments should develop “user-controlled, ‘self-sovereign’ identity capabilities” to create secure, private, unique and verifiable identities, that can provide sufficient proof of identity without revealing more data than it is necessary for a transaction. The report recognizes that this has proven difficult to achieve with centralized technologies.

While the idea behind blockchain-based self-sovereign identity is that individuals could keep verified personal information themselves, instead of third parties, the EUBOF notes potential challenges for governments.

The report states that identity standards and frameworks must first be developed, in addition to defining the extent to which people want identity systems to be decentralized. It adds:

“They [governments] will have to take into account how identity attributes change over time during a person’s natural lifecycle, and will need to offer different levels of transparency depending on the context (e.g., verifying that someone is over 18 without providing a birth date). Identity platforms also need to be inclusive of all citizens, including those who, for whatever reason, have no access to or are not able to use technology.”

Another important issue raised in the report is digital versions of national currencies on a blockchain, or the ability of governments to “put fiat currency on the chain.” The report further reads:

“Putting digital versions of national currencies on the blockchain means they could then become integral parts of smart contracts. That would unlock much of the potential innovation of blockchain by allowing parties to create automated agreements, including direct transactions in these currencies, instead of having to use a cryptocurrency as a proxy.”

The report cites plans and initiatives of central banks in tokenizing national currencies, or inter-bank payments with distributed ledgers to make transaction processes more transparent, resilient, and cost efficient. Moreover, governments could purportedly use blockchain-based tokens in non-monetary ways, like an e-voucher that can be exchanged for government services.

This week, Malta, France, Italy, Cyprus, Portugal, Spain and Greece released a declaration calling for help in the promotion of Distributed Ledger Technology’s (DLT) use in the region, claiming that could be a “game changer” for southern EU economies. Among other things, the group also cited blockchain tech’s use for protecting citizens’ privacy and making bureaucratic procedures more efficient.

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Joseph Lubin: ETH Incubator ConsenSys Gets ‘Lean and Gritty’ in Competitive Market

Ethereum blockchain startup and incubator ConsenSys plans to streamline and toughen its business style amid a competitive blockchain space.

Major Ethereum (ETH) blockchain startup and incubator ConsenSys plans to streamline and toughen its business style amid an increasingly “crowded” competitive blockchain space. The shift in strategy was reported by online tech journal Breaker on Dec. 3.

Breaker cites a letter to staff from ConsenSys CEO and Ethereum co-founder Joseph Lubin, reportedly sent late last Friday night, which outlines a new phase in the Brooklyn-headquartered company’s work. As per the letter, ConsenSys — which employed over 1,100 employees as of February 2018, across 29 countries — is entering what Lubin calls “ConsenSys 2.0.”

This, according to Breaker, represents a more efficiency and revenue-driven approach company-wide, with ConsenSys Ventures — its investment arm — set to become closer to a “traditional startup accelerator.” Lubin’s letter reportedly told staff that:

“We must retain, and in some cases regain, the lean and gritty startup mindset that made us who we are. We now find ourselves occupying a very competitive universe […] to ‘succeed wildly’ […] we must recognize that what got us here will probably not get us there, wherever ‘there’ is.”

In an interview with Breaker on Nov. 30, Lubin clarified that ConsenSys’ leadership will “get a lot more rigorous in terms of milestones and timetables, [even if that entails] dissolving projects if we’ve come to the conclusion that our earlier assumptions were incorrect.”

Projects under ConsenSys’ wing, the letter has reportedly outlined, will be judged by three broad metrics: revenue (or return on investment, even if based on projected future value), benefit to the Ethereum ecosystem, and social good.

While the company plans to reassign staff from shuttered projects to other initiatives, Lubin reportedly “did not rule out layoffs” in his interview with Breaker.

Part of the “lean and gritty” mentality extends to a parsimonious approach to staff expenses, with a dedicated team for cutting travel costs and a proprietary mechanism in the works for the firm to compare prices across hotels.

Lubin told Breaker that even while the projects under its oversight remain “agile,” the company as a whole has become unwieldy. While stressing the continuity in the company’s vision, he noted that ConsenSys 2.0 would entail “focusing […] [and] adding rigor [and] accountability” in the midst of what he called an industry-wide price “contraction.”

As reported last month, decentralized social networking platform Steemit is laying off more than 70 percent of its staff in the wake of the recent crypto market crash, as well as beginning a structural reorganization.

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Major South Korea Tech Holding and ConsenSys Sign MoU to Develop Blockchain Business Hub

SK Group has signed an MoU with ConsenSys to create and develop an “enterprise blockchain ecosystem.”

South Korean technological holding SK Group has signed a Memorandum of Understanding (MoU) with ConsenSys for blockchain business cooperation, according to a SK Group official press release published today, Dec. 4.

SK Holdings C&C is the information technology solutions arm of the SK Group, one of the the largest conglomerates in South Korea. The entity has partnered with ConsenSys, an Ethereum (ETH) software technology company based in U.S., to create and develop an “enterprise blockchain development hub.”

The MoU is aimed at building an enterprise blockchain business model by using smart contracts, the press release notes, adding:

“The two companies will begin to explore business models for expanding their enterprise blockchain business through joint analysis of their respective blockchain platforms, technologies and services.”

The new partnership will also include Ethereum blockchain technology education for Korean developers through ConsenSys Academy and SK Holdings C&C’s Tech Training Center, scheduled to be completed by the end of the year.  

Back in the summer, ConsenSys had already agreed to advise China’s Xiongan New Area government on blockchain and software solutions to bring new technologies to the Chinese “smart city,” as Cointelegraph reported Jul. 24.

SK Group has already made several steps towards the cryptocurrency market. SK Telecom, a subsidiary of the SK Group, has invested in crypto exchange Korbit among the first major investors. In the spring, SK Telecom also announced the release of a new tech platform for linking blockchain startups with investors, as Cointelegraph wrote Apr. 24.

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First Blockchain Association in Mexico Established

Seven blockchain industry players, including ConsenSys, have launched the first blockchain association in Mexico.

The first blockchain association in Mexico has formed, its founding members including industry players like blockchain software firm ConsenSys, Forbes Mexico reported Nov. 28.

The Blockchain Association of Mexico was established companies Bitso, Volabit, BIVA, GBM, Lvna Capital, ConsenSys and Exponent Capital. The organization’s objective is to educate citizens in the technology’s deployment and its potential applications.

The association reportedly intends to develop standards and practices before the technology becomes mainstream. Felipe Vallejo, provisional president of the Blockchain Association said that “[blockchain] technology has the objective of creating more transparent, safe and efficient procedures.”

The association is purportedly open for new members. BIVA director María Ariza said “we want to generate a space for discussion and public policy. We want everyone to be able to present their ideas.”

Cryptocurrency and blockchain industry leaders have launched various associations in order to facilitate the technologies’ adoption and work with regulators to develop comprehensive standards. On Nov. 27, ten financial and tech firms established the Association for Digital Asset Markets (ADAM) to create a “code of conduct” for the cryptocurrency sector.

In September, a group of U.S.-based blockchain and crypto companies, including crypto exchange Coinbase, announced establishment of the Blockchain Association based in Washington D.C. The association is set to represent mainstream companies that look to operate within the political system, primarily addressing policy issues and the treatment of cryptocurrency by U.S. tax law.

Meanwhile in September, the Mexican state-backed Bank of Mexico (Banxico), announced that all  crypto exchanges and banks providing crypto services in Mexico will be obliged to receive a permit from the bank. To get one, a company dealing in digital currencies must provide a detailed business plan complete with a description of their operations, the commissions they plan to charge, and the mechanism they will use to verify customer identity.

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ConsenSys Partners With Online Education Platform to Launch Blockchain Course

ConsenSys and online educational platform Coursera have partnered to launch a blockchain-related training course.

Blockchain startup ConsenSys has partnered with online education platform Coursera to offer a blockchain technology course, according to an announcement published September 5.

The two companies are launching a course entitled “Blockchain: Foundations And Use Cases.” The course is designed to provide students an introduction to the technology and develop the skills needed to understand how blockchain is changing certain industries, as well as the ways blockchain can solve specific problems.

According to Coursera, the course is designed for students of varying skill levels, including individuals who lack a technical education.

Earlier today, the Linux Foundation opened enrollment for its new advanced training course for Hyperledger Fabric blockchain technology. The new course will reportedly enable students to tackle the fundamentals of blockchain and distributed ledger technologies (DLTs), alongside “the core architecture and components” that underlie decentralized Hyperledger Fabric applications.

Educational institutions around the world have been actively embracing blockchain technology, both in practical application and in their curricula. A recent study conducted by crypto exchange Coinbase showed that 42 percent of the world’s top 50 universities have at least one class on cryptocurrencies or blockchain.

In August, Malta, South Korea, and Turkey all announced blockchain and DLT-related educational programs dedicated to fostering young talent and increasing the availability of skilled professionals in the fast-growing industry. The Tezos Foundation also announced it will be issuing financial grants to research institutions for blockchain tech and smart contracts development at several universities located in the U.S., Portugal, and France.

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China: Insurance Giant Ping An Releases “White Paper on Smart Cities,” Advocates for Blockchain

China’s Ping An Insurance, one of the world’s largest insurance company groups, has released a “White Paper on Smart Cities,” advocating for blockchain tech, AI, big data, and cloud computing, People’s Daily reports August 22.

Ping An Insurance, a Chinese conglomerate with operations in insurance, banking, and financial services, was ranked the third most valuable global financial services company in the world as of May 2018.

According to People’s Daily, the company released its “White Paper on Smart Cities” on August 21. The reported goal is to “help the government to create a new model of “city as a service” governance” and to “propose a comprehensive, systematic, highly-recognized methodology and solution, with “wisdom, [and intelligence]” as the main line of thinking.” The document adds:

“In promoting the development of “smart city”, Ping An puts forward the system of [intelligence] in the perspective of service and creativity, and promotes it with practice. At present, Ping An has mastered a large number of core professional technologies and is more confident in this field. Ping An’s five core technologies: biometrics, big data, artificial intelligence, blockchain and cloud platforms have reached the global leading level.”

China is one the leading countries in the world when it comes to implementing new technologies, such as blockchain, AI, internet of things (IoT) in the creation of “smart cities,” of which the country plans to establish one thousand.

Currently, one of the most successful Chinese “smart cities” is Xiong’an, which was declared by President  Xi Jinping as a special economic zone back in October 2017. In July of this year, Xiong’an’s government has signed a Memorandum of Understanding (MoU) with ConsenSys, with plans for the company to advise the government on blockchain software solutions.

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BBVA Can't Hold Cryptocurrency – And That's a Problem

After becoming the first financial institution to combine public and private blockchains in a live transaction, Spanish multinational bank BBVA has hit something of a quandary.

Specifically, it’s unsure how to take its forward-thinking work … forward.

In the process of executing what was expected to be the third in a series of blockchain-based corporate loans, the bank had to work around a lack of legal and regulatory clarity over whether it could (or should) hold the cryptocurrency needed to power a transaction on ethereum.

In short, BBVA’s innovation is meant to act like a public notary service, combining private Hyperledger technology (used to negotiate the loan) with a public blockchain (in this case ethereum) in an effort to identify and store each loan agreement with auditability.

However, erring on the side of caution, BBVA chose to abide by European Banking Authority (EBA) recommendations and not use the native token of ethereum, ether, which also serves as a kind of fuel to update the ledger. Instead, the bank anchored the loans to an ethereum testnet, a blockchain which simulates the live version, but that doesn’t move real value.

No big deal, you might think, but this uncertainty is hindering the hard-won innovation work.

Alicia Pertusa, managing director of corporate and investment banking at BBVA, said that according to the EBA recommendations of 2014, European banks are discouraged from owning, buying or selling cryptocurrencies. She pointed out that the process BBVA used for the loans was exactly the same as it would have been on the live ethereum, the only difference is it would need the regulator’s approval before using the real ether.

While the Bank of Spain, the regulator in this case, would not go on the record, it’s clear regulators understand banks may need or want to have small amounts of crypto, not as an asset or an investment, but to validate transactions.

Regulators tend to point out that the EBA 2014 recommendation is not legally binding and thus is not a formal ban. Still, the compliance department of a given bank would have to judge whether this particular use of cryptocurrencies is advisable.

Pertusa told CoinDesk:

“We do think that regulators are evolving in the way they look at cryptocurrencies and in this case in particular we have talked with our regulators. They understand very well that the use of gas and ether in this kind of network is very different from the speculation of cryptocurrencies.”

Regulatory requirements

Still, the results are a rare, tangible example of how inconclusive guidance, combined with big-bank jitters about the possibility of plans going wrong, are having an impact on innovation.

Only in March of this year, EBA chief Andrea Enria said it would be more effective to prevent banks and other regulated financial institutions from holding cryptocurrencies, rather than regulating the tokens themselves.

In a statement to CoinDesk, the EBA said: “The EBA has issued several warnings to consumers regarding virtual assets and has discouraged financial institutions from gaining exposures to such assets in view of their high-risk nature. However, as a matter of EU banking law, there is no prohibition on financial institutions gaining direct or indirect exposures to such assets.”

None of this lessens the irony that BBVA is doing real corporate loans – €75 million to technology company Indra in April; followed by last month’s €325 million to oil and gas company Repsol; and last week €100 million to construction firm ACS – but is uncomfortable holding a few dollars worth of ether because of mixed signals from regulators.

In fact, BBVA’s corporate loans platform achieves a number of regulatory goals, such as making the pre-trade negotiation of the loan – which is normally done with a mix of phone calls and messages – a single, transparent and easily audited process. And the lessons learned from the tethered loans will be taken on into BBVA’s blockchain syndicated loans project, which will launch in the coming weeks.

As far as the public part is concerned, Pertusa acknowledged that while public blockchain notarization is a powerful tool for those who know how to use it (there is lots of appetite among the bank’s clients for this tech, she said) there still needs to be plenty of education elsewhere.

She told CoinDesk:

“We see this as the future of public notaries because at the end of the day it’s a public record of an agreement that’s been reached privately. But a lot still needs to happen in that direction in terms of regulation, admitting that this public blockchain has the same value as a public notary.”

A popular use case

Turns out public blockchains are a popular tool for anchoring data – that is, creating a timestamped proof that the data existed at a certain time –  in the world of enterprise ethereum.

Kaleido, the partnership between ethereum development studio Consensys and Amazon Web Services, found that enterprises wanted to anchor private blockchain applications on the public chain more than just about any other blockchain-as-a-service feature.

Indeed, a poll of Kaleido blockchain cloud users saw this use case come out on top with some 37 percent of votes.

The results mirror what we are hearing in our client and partner discussions around the world,” said Kaleido founder Sophia Lopez.

Asked what he thought of the uncertainty facing banks looking at public blockchains for this purpose, Steve Cerveny, CEO of Kaleido, said he was aware of the issue and is in discussion with customers about it, adding that a workaround is in the offing.  

“We are currently exploring how Kaleido’s pinning/tether feature as-a-service could alleviate this concern,” said Cerveny. “For example, they pay Kaleido in fiat for this optional feature and Kaleido handles all of the technical details including ether/gas.”

Speaking on behalf of the Enterprise Ethereum Alliance, Conor Svensson, blk.oi founder and EEA standards chair, said the conundrum demonstrates why financial organizations are far more comfortable working with private blockchain deployments.

He concluded:

“It’s where they can exert a much higher degree of control over the network and are not bound by the same regulatory concerns that apply whilst working with the public blockchains.”

BBVA image via Shutterstock

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